What you do with your money says a lot about you. It paints a more accurate picture than you might think. Are you a sacrificial, giving person or are you a selfish hoarder. While we don’t ever WANT to admit our own human condition, we must if we want to change it. Whatever degree your at that led you to this site, I’m glad your here, and let me tell you, that your amongst good company. I, myself, used to be a selfish hoarder of the 10th degree.
Here’s what I’ve learned since then.
The first step to getting out of debt is to put God first in your life. Pay your tithes and give extra if you can. This is a different amount for everyone. There are no hard and fast rules. It is simply what you decided in your heart between you and God (oh yeah and if your married, you might want to include your spouse too.:) ) Here’s the reason. You can’t fully have an accurate view of your spending habits and money, unless your right with God first.
Next, you’ll want to know what you spend and where you spend it. Whom do you spend it with? What are your habits? Then, set limits, create a budget if you don’t already have one. It’s OK if you don’t stick to it perfectly. If your just starting out with all this, you most likely won’t. That’s OK. It’s still new and the more you practice, the better you’ll get.
Live below your means. I know this isn’t rocket science, but many Americans don’t. We’re constantly bombarded with the BUY ME BUY ME mentality and we have to really have a strong desire for godliness to be able to say NO! Again, practice.
The next step is to have an emergency fund. I remember working at a credit union years ago, and there was a certain man, who left $50 in his account every month for ‘mergencies.’ Emergencies to him almost always involved booze. It painted such a vivid picture in my mind when he would come in every month and withdraw his ‘mergency’ money for booze. Sometimes it looked like he already had too much, to be honest. But without fail, he was there every month to collect his money. It made me realize early on, that he had a pattern and that he COULD save money if he wanted to. He had a HABIT of SAVING money, but broke it in one day of the month. What IF, that ‘mergency’ fund was used for good? What IF he took just $20/month out and left $30. In the 4 years that I saw him every month, he would have more than $1,600 saved up between his money and interest.
Little habits add up to big savings.
The general rule of thumb for the first step is to have $1,000 in your emergency fund.
Payoff your credit cards. Some people like to skip the emergency fund and go straight into paying off the credit cards. Here’s the thing. We live in something called LIFE. And in this game called LIFE, something always goes wrong. If you don’t have your emergency fund in place, WHEN that emergency comes up, you’ll put it on your credit card, right. Then, you will feel so defeated and you will lose your desire to get out of debt. I’ve seen it countless times. So, set yourself up for success: don’t skip the emergency fund step.
Now, you want to NEVER EVER under any circumstances (because you have your emergency fund in place) use your credit cards again. Swear them off like they don’t exist. I’ve seen people do some drastic things. My favorite story was of a young woman who vowed never to use her credit card again. She was an impulse buyer. She’d buy on impulse and use her card. $20,000 later, she looked around her then mobile home one day, and wondered where the $20,000 was. She didn’t have anything in particular to show for it. Her husband and her could barely survive on $5,000/month income. So, she took her credit cards and froze them in water. Now, if she wanted to buy something, she couldn’t. It was FROZEN. GET IT?????? lol. It really helped her stop using the cards. It took a while as she was pretty stubborn, but she learned that she really didn’t need them after all, and went on to pay off debt consistently. Now, if I had the guts I would tell you that woman is me, but since I don’t, I won’t.
The moral of the story is that now… this woman lives RICH on $18,000/year instead of BROKE on $60,000/year.
Next, as the story goes, practice LONG TERM savings and investing. You want to earn money on your money right, not pay money to borrow it. You want to be on the other side. So, make sure your emergency fund and all your saving is in the highest interest option you have. Say you have $2,000 in savings. You could take $500 or even $1,000 of that and put it in a 6 month or 1 year CD and earn even MORE interest. That is really the best way to go and you’ll earn the most on your money. Then, start trying to save up for more CD’s. If the minimum deposit required is $500, shoot for $500. And keep purchasing them.
Lastly, start selling to create resources. This can be fit in anywhere along the way. Just so long as you have your foundation in saving money laid nicely, you’ll be okay. I have a WHOLE section on creating resources here.